About "sunk costs"

Today, let's focus on discussing“Sunk cost”This is an economic concept that I believe many people have already learned. The meaning of sunk cost is the cost that has already been incurred in order to do something, regardless of whether it continues or not The cost is so much.


A simple example is, if you go to the sports hall with a ticket to a game, but lose the door on the way Tickets. Your best choice is to buy another ticket at the entrance of the venue (assuming there are sufficient ticket sources). But some people may feel that, So if I buy another one, it's like spending money2The money for a ticket to watch a game is too much of a loss. This is a typical psychological misconception, and those who understand it immediately realize that it is a ridiculous algorithm. Because the first ticket has already been lost, whether you watch the game or not, that loss has already occurred. If you think watching a game is worth that price, then buy another one.


It is ridiculous that although most people understand that sunk costs should not affect decision-making, in practice, they still involuntarily fall into this trap. For example, my friend went to Guilin to play, and the melon seeds at the entrance of the scenic area were10He bought one package for one yuan, But as we walked in the middle, we found that it was5For one pack, he felt like he had been tricked, so he bought two more packs and lowered the unit price. then Walking into the scenic area, I found that melon seeds only need2A pack of yuan made him even more angry, so he quickly bought it3Pack, lower the unit price a bit. This is a real story, I don't know which fan has also encountered such a melon seed in Guilin? Welcome to leave a message in the post.


In fact, he didn't think the melon seeds were delicious, but rather felt that he had bought them expensive, which made him very unhappy. When I first entered college, Mobile launched a package that included one month100SMS messages must be reset to zero if not used up in the current month, and cannot be accumulated until next month. Often, by the end of the month, we find that we have only used90I will send empty messages or a bunch of useless messages to my classmates. The purpose is not to waste or let mobile take advantage of it. Later on, I realized that I was particularly foolish and useless in doing this.


In terms of investment, we involuntarily fall into the trap of "sunk costs". Buffett once said, "If you find yourself in a pit, please don't continue digging with a shovel.". If you find out that you bought the wrong stock, you shouldn't have bought this company at all, and you happen to have lost money again 20%So what should we do? The answer is actually very simple, that is, never wait for the return on investment before selling, but immediately sell it.


Of course, this premise is that you find yourself buying the wrong item. Don't add extra weight to the wrong things. I can't say, I've already lost money20%I'm really unwilling to wait for my return. Furthermore, admitting one's mistake means negating one's previous judgment and making oneself imperfect. Because your original intention in coming to the market is to make money, not to prove how smart you are. Don't fall into the trap of sunk costs.


But if you take a different approach to the above question, your choice will immediately become much simpler. Assuming you have100Ten thousand dollars, you just lost it on your way to the bank20Wan, it will never be found again. At this point, there is still room for improvement80Wanmei Yuan, you can choose to buy the stock that you think is wrong. Are you willing to buy this stock? At this time, the vast majority of people are not willing to buy or hold the wrong stock.


The best way to avoid the trap of sunk costs is to think more about "opportunity costs", which means assuming that you continue to consume, what you will gain and what potential benefits you will lose.


Opportunity cost is an implicit cost that is difficult to accurately calculate. You need to think for yourself. People like to do things according to inertia, and few people think about what sticking to conventions will cause them to lose. Investment is oriented towards the future, and you should always choose the most correct thing to do as much as possible.


Author: Hou Anyang